£864m of credit card charges not stopped by government plans

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Re: £864m of credit card charges not stopped by government plans

£864m of credit card charges not stopped by government plans

Monday, 13 Jul 2009 10:43


The government crackdown on credit card companies still leaves consumers open to £864 million worth of charges.

Last week's consumer white paper from the department for Business, Innovation and Skills (BIS) looked at banning unsolicited credit card cheques that come with high interest rates and handling fees.

The paper also aims to tackle the order at which debts are paid off on credit card debts, which often leads those with the highest interest rates waiting to be cleared last, along with minimum repayments and increasing credit limits.

However, a number of other areas are not being settled, leaving credit card companies able to increase other charges.

uSwitch.com estimates a further £864,000 million of charges are hitting credit card customers through cash withdrawal fees, balance transfer fees and overseas transaction fees.

On average this means £28.61 of fees per customer.

It is estimated some 7.3 million consumers made 38 million cash withdrawals last year – despite interest rates on cash taken out up to 32 per cent, compared to an average purchase APR of 17.69 per cent.

uSwitch claims some 69 per cent of people who make cash withdrawals do not know how much it costs and 12% per cent believe there is no difference in charges from a debit card withdrawal.

Louise Bond, personal finance expert at uSwitch, said: "Cash withdrawal fees are a huge issue for consumers, particularly when they travel abroad. This is quite a big oversight and it will only serve to leave the credit card industry with a ‘rob Peter to pay Paul' opportunity if they do actually lose money on the other issues highlighted.

"There are still some great credit card deals around so consumers really should spend some time hunting down the next best deal.

"High fees and charges for specific practices do not impact every single credit card customer as they may not use every facility on offer.

"However, for those that are struggling financially, every provider has a different charge for every facility they offer so it's still worth finding the cheapest provider for your individual needs."

She went on to describe balance transfer fees as a "necessary evil" to secure the next best balance transfer deal, but stated charges of up to £55 seemed "slightly excessive".

Balance transfer fees have increased by 0.24 per cent in the last year to an average of 2.93 per cent. This represents £54.09 on the average balance transfer of £1,846.